CITATION: Environmental Building Solutions Corporation v. 2420124 Ontario Limited et al., 2017 ONSC 6769
COURT FILE NO.: CV 16-093
DATE: 20171110
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Environmental Building Solutions Corporation, Plaintiff
AND:
2420124 Ontario Limited, 2420125 Ontario Limited and The Corporation of the Municipality of Grey Highlands, Defendants
BEFORE: Justice C.J. Conlan
COUNSEL: Terrence A. Pochmurski, for the Plaintiff
David M. Pomer, for the Defendants
HEARD: October 17, 2017
ENDORSEMENT ON COSTS
Conlan J.
I. Introduction
[1] The Defendants, 2420124 Ontario Limited and 2420125 Ontario Limited (the “moving parties”), were successful in obtaining a Court Order to vacate a construction lien and related Certificate of Action.
[2] For a more fulsome background, and in order to understand the litigation and the Motion that this costs decision stems from, reproduced below are paragraphs 1 through 19, 24, and 25 of this Court’s Reasons for Decision on the Motion reported at 2017 ONSC 6202.
[1] In April 2016, the Plaintiff, Environmental Building Solutions Corporation (“EBSC”), commenced a Statement of Claim related to the Construction Lien Act, R.S.O. 1990, c. C.30, as amended (“CLA”).
[2] There are three Defendants, 2420124 Ontario Limited (“2420124”), 2420125 Ontario Limited (“2420125”), and The Corporation of the Municipality of Grey Highlands (“Grey Highlands”).
[3] EBSC, based in Toronto, Ontario, supplies labour and materials for the renovation, repair and remediation of buildings.
[4] 2420124 and 2420125 were at all material times the owners of the land in question, while Grey Highlands was a mortgagee of the land.
[5] By “land”, I am referring to the property that is the subject of the construction lien registered by EBSC. That land is in Euphrasia, Grey Highlands (150 Talisman Mountain Drive, Kimberley, Ontario).
[6] The amount of the registered lien is $211,875.00. The lien was filed on March 4, 2016.
[7] It is alleged by EBSC that, on or about June 2, 2014, it contracted with 2420124 for EBSC to provide project management services and to supply labour and materials for the removal of mould from the land.
[8] EBSC alleges in the Statement of Claim that it performed the work contracted for, which work improved the land, and is owed by 2420124 the sum of $211,875.00.
[9] EBSC’s claim is not limited to that advanced under the CLA, however. It also alleges that 2420124 and 2420125 are liable in quantum meruit based on unjust enrichment and/or on the basis of a breach of contract.
[10] Grey Highlands is a Defendant because part of the land was mortgaged by 2420124 to Grey Highlands on May 30, 2014, for the sum of $200,000.00. EBSC claims priority over that mortgage.
[11] 2420124 and 2420125 have defended the action and have advanced a counterclaim.
[12] Those Defendants deny that any money is owed to EBSC.
[13] Those Defendants also dispute the validity of the lien as it was registered too late given that the work was completed by the end of July 2014.
[14] Those Defendants further dispute that EBSC has any right to claim priority over the mortgage in favour of Grey Highlands.
[15] The Counterclaim seeks general damages of $750,000.00 and punitive damages of $100,000.00 based on EBSC’s improper registration of the lien which has allegedly resulted in an inability to obtain financing for and earn rental income on the land.
[16] EBSC has defended the Counterclaim.
[17] 2420124 and 2420125 have brought a Motion. The prayer for relief seeks to vacate the lien and the related Certificate of Action, strike out EBSC’s pleadings, and dismiss EBSC’s action entirely, with costs in favour of the moving parties.
[18] Succinctly put, the moving parties submit that the last day of work by EBSC with respect to the Claim for Lien was on or about July 24, 2014, while the lien was not registered until March 4, 2016, well beyond the 45-day time limit required by the CLA.
[19] In addition, the moving parties submit that no money is owed to EBSC; all amounts due under the contract have been paid in full. Thus, the action should be dismissed on that ground alone.
[24] In short, EBSC admits significant deficiencies with its action: (i) the lien amount is incorrect and should be $167,063.84 rather than $211,875.00, and (ii) the claim should have been made more clear that it relates to a “very loosey-goosey arrangement” (that is the term used in EBSC’s Factum), in other words an imprecise oral contract, that the parties allegedly entered into after the initial and more formal mould removal contract had been completed, and (iii) the short description of services or materials in support of the lien is incomplete.
[25] EBSC wants to amend its Claim for Lien and its Statement of Claim, although no motion has been brought for that relief. It argues that no prejudice has been suffered by 2420124 and 2420125.
[3] Only part of the Motion was decided – that related to the validity of the lien and the Certificate of Action. On that issue, the moving parties were successful in that the lien and the Certificate of Action were vacated.
[4] The remaining relief sought by the moving parties, namely the striking of the Plaintiff’s pleadings and the dismissal of its action, was neither dismissed nor granted. That part of the Motion was adjourned.
[5] In a short Endorsement reported at 2017 ONSC 6275, this Court directed that costs of the Motion thus far ought to be dealt with now.
The Positions of the Parties on Costs
[6] The parties have been unable to settle the issue of costs. Written submissions have been filed.
[7] The moving parties seek costs on a substantial indemnity scale. Including disbursements and tax, the total quantum sought is $24,291.13.
[8] The moving parties made two offers to settle the Motion. The first one would have had the Plaintiff discharge the lien (and, presumably, the Certificate of Action) and pay costs in the amount of $3000.00.
[9] The second one would have had the Plaintiff discharge the lien and the Certificate of Action and pay costs in the amount of $12,000.00.
[10] Both offers were formal ones, in writing, and made well before the hearing date of the Motion, October 17, 2017.
[11] The Plaintiff has not made this Court aware of any offers to settle that it may have made before October 17th.
[12] The Plaintiff submits that the moving parties ought to be awarded their costs on a partial indemnity basis, subject to the caveat below.
[13] The Plaintiff argues that the moving parties’ first offer to settle, made in April 2017, is deficient in that it did not expressly ask that the Certificate of Action be vacated but rather just that the lien be discharged. Thus, it is submitted that this Court ought not to consider that first offer as falling within the provisions of Rule 49 of the Rules of Civil Procedure.
[14] Now the caveat to the Plaintiff’s position. The Plaintiff acknowledges that the moving parties’ second offer to settle, made in September 2017, is a valid Rule 49 offer. Thus, it is conceded that the moving parties should be entitled to substantial indemnity costs after the date of that second offer.
[15] Again, however, there is a qualifier. Actually, three of them. The Plaintiff complains that the moving parties have not accounted for the $5500.00 paid by the Plaintiff already, as per previous Court Orders. Second, the Plaintiff argues that the moving parties’ Bill of Costs is excessive in terms of time spent on various tasks. Third, according to the Plaintiff, partial indemnity costs ought to be calculated at a rate of 60% of full fees, and substantial indemnity costs ought to be calculated at a rate of 74% (not the 90% being claimed by the moving parties).
[16] After making those adjustments, the Plaintiff concludes that the moving parties are due $9256.46 in costs, all-inclusive.
II. Analysis and Conclusion
[17] First, some basic legal principles.
[18] As is rightly conceded by the Plaintiff, this is not a case for no costs based on divided success. The moving parties were entirely successful on that part of the Motion that has been decided, and thus, they are presumptively entitled to some costs.
[19] Quantum of costs is discretionary. The overriding objective is to make an award that is fair, just and reasonable in all of the circumstances, including a consideration of what the more unsuccessful side of the litigation would reasonably expect to pay.
[20] In determining the quantum of costs, I ought to consider Rule 57, in particular, the factors outlined in 57.01(1).
[21] I should also keep in mind the fundamental purposes of modern costs awards: to partially indemnify successful litigants, to encourage settlement, and to discourage inappropriate conduct by litigants.
[22] Under sub-rules 49.10(1) and (2), assuming that certain prerequisites are met, a party who obtains a decision as favourable or more favourable than its offer to settle is presumed to be entitled to partial indemnity costs up to the date that the offer was served and substantial indemnity recovery thereafter.
[23] It should also be remembered, however, that any offer to settle may be considered for costs purposes, regardless of whether that offer falls within Rule 49.
[24] Now, let us deal with the submissions made by the Plaintiff, summarized above.
[25] First, I disagree with the Plaintiff that the first offer to settle made by the moving parties does not meet the requirements of Rule 49. It does.
[26] The Plaintiff is correct that there is a difference between discharging a lien, ordering that the registration of a claim for lien be vacated, and ordering that both a claim for lien and a Certificate of Action be vacated. The proof of that is the wording of subsection 47(1) of the Construction Lien Act, R.S.O. 1990, c. C.30, as amended, set out below.
- (1) Upon motion, the court may,
(a) order the discharge of a lien;
(b) order that the registration of,
(i) a claim for lien, or
(ii) a certificate of action,
or both, be vacated;
(c) declare, where written notice of a lien has been given, that the lien has expired, or that the written notice of the lien shall no longer bind the person to whom it was given; or
(d) dismiss an action,
upon any proper ground and subject to any terms and conditions that the court considers appropriate in the circumstances.
[27] That is irrelevant, however, as to whether the April 2017 offer to settle falls within Rule 49.
[28] The fact that the said offer omitted the requirement to vacate the Certificate of Action does not help the Plaintiff’s position. It hurts the Plaintiff because it makes it all the more clear that the decision on the Motion was better for the moving parties than if the said offer was accepted by the Plaintiff.
[29] Put another way, the omission to vacating the Certificate of Action was to the detriment of the moving parties. If the Plaintiff had accepted that first offer to settle, the result would have been better for the Plaintiff (the Certificate of Action would have remained) than the result after the Motion was decided (both the lien and the Certificate of Action were ordered vacated).
[30] Second, I agree with the Plaintiff that, although the prior costs awards made against the Plaintiff and already paid by it were due to the fault only of the Plaintiff itself, what has already been paid should be taken into account in assessing the further costs to be awarded to the moving parties.
[31] Third, I disagree with the Plaintiff that the time spent by counsel for the moving parties ought to be reduced. I see nothing excessive about it. It is not for this Court to dissect every entry in the Bill of Costs. As for the Motion materials delivered by the moving parties, I found them to be thorough and helpful.
[32] Finally, I disagree with the Plaintiff that substantial indemnity recovery cannot or should not amount to 90% of what the full amount of the fees is.
[33] There is no fixed percentage that must apply to all substantial indemnity costs awards.
[34] In my view, however, any award of substantial indemnity costs ought to meet at least four criteria. The first is obvious – it must be higher than partial indemnity, which in this case both sides peg at 60%. Second, again an obvious point, it must be less than full recovery. Third, it should generally be around 1.5 times the partial indemnity rate, which in this case would be exactly what the moving parties seek – 90%. And fourth, it must still meet the proportionality test, meaning that the Court might still exercise its discretion to reduce whatever amount is arrived at using the straight percentage calculation.
[35] In summary, I am of the view that the moving parties are entitled to their costs on a partial indemnity basis up until service of their first offer to settle in April 2017, and substantial indemnity recovery thereafter, with some consideration given for the costs paid by the Plaintiff already, and subject always to an overall assessment of proportionality and what is a fair, just and reasonable quantum in all of the circumstances.
[36] It is difficult to tell from the materials filed what the moving parties’ partial indemnity costs were up until the date that their first offer to settle was served, although it is clear that the $24,291.13 figure is based on substantial indemnity recovery throughout (and not just after the date that the first offer to settle was served in April 2017).
[37] So something has to come off that figure of $24,291.13.
[38] It appears that only minimal fees pre-service of the first offer to settle have been included in the moving parties’ Bill of Costs, approximately $2800.00, before tax, based on full indemnity. Thus, that “something” will not be much.
[39] And something further has to come off to account for the $5500.00 in costs already paid by the Plaintiff. Not the full amount, though, as that would be too generous to the Plaintiff. After all, those costs were awarded because the Plaintiff requested multiple adjournments of the Motion, resulting in some costs being thrown away.
[40] I have decided to reduce the $24,291.13 by $1000.00 to account for the difference between partial indemnity recovery and substantial indemnity recovery up until the date that the first offer to settle was served in April 2017, and to apply a further reduction of $2750.00, half of the costs already paid by the Plaintiff.
[41] That results in a total figure of $20,541.13.
[42] Although I have no difficulty with the 90% recovery rate sought by the moving parties in terms of what substantial indemnity means, overall, I think that approximately $20,500.00 in costs for a Motion of this kind is a touch high.
[43] Remember, assessing costs is more of an art than a science.
[44] In my opinion, a round figure of $18,000.00 is more appropriate in this case.
[45] This Court therefore orders that the Plaintiff pay to the moving parties the total sum of $18,000.00 for costs of that part of the Motion that has been decided thus far.
[46] To be clear, that sum is in addition to any costs already paid by the Plaintiff.
Conlan, J.
DATE: November 10, 2017
CITATION: Environmental Building Solutions Corporation v. 2420124 Ontario Limited et al., 2017 ONSC 6769
COURT FILE NO.: CV 16-093
DATE: 20171110
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Environmental Building Solutions Corporation, Plaintiff
AND:
2420124 Ontario Limited, 2420125 Ontario Limited and The Corporation of the Municipality of Grey Highlands, Defendants
BEFORE: Justice C.J. Conlan
COUNSEL: Terrence A. Pochmurski, for the Plaintiff
David M. Pomer, for the Defendants
ENDORSEMENT ON COSTS
CONLAN, J.
DATE: November 10, 2017